Rolando Fuentes

Senior Visiting Research Fellow

Rolando Fuentes is a Research-Professor of Finance at EGADE Business School- Tec de Monterrey in Mexico. Before joining EGADE, he was a Senior Economist (Research Fellow II) at the King Abdullah Petroleum Studies and Research Center (KAPSARC). His research interest has focused on developing new business and regulatory models for future electricity markets. He received the best paper award at the 8th Conference of the Regulation of Network Industries 2019, organized by the Florence School of Regulation.

Rolando has experience in the public sector, where he served as Director of International Negotiations and Director at the Undersecretary of Hydrocarbons at Mexico’s Ministry of Energy. Dr. Fuentes is an economist from Tecnológico de Monterrey (graduated with honours) and holds a PhD from the London School of Economics (LSE) for research into the environmental outcome of liberalizing the power sector in Mexico and an Msc in Environmental Economics from University College London (UCL). He was recipient of the British Chevening Scholarship in 2001, and was an LSE Fellow in 2008-2009.

Contact

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                    [post_content] => This paper proposes a paradigm shift from price-based to quantity-based electricity subsidies, inspired by
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                    [post_content] => This insight seeks to conceptualize the interactions between the energy transition and the digital transition in the electricity sector. Overall, the digital transition will lead to a more efficient and flexible electricity sector, but will require careful consideration of its implications for the industry structure and pricing mechanisms. Digital technologies can also enable new energy ecosystems, help innovate business models, and accelerate the energy transition itself.

Based on a transaction cost approach, this piece offers insights in three areas: industry structure, ultimate products, and pricing. The digital transition in the electricity sector will lead to a vertical fragmentation in the value chain, but also to horizontal integration with other sectors such as transport. While digitalization may increase fragmentation and market power in the value chain, it can also create new opportunities for smaller players, and reduce excess capacity. Additionally, new smaller players are expected to enter the market, competing in a modular fashion rather than based on scale. This may lead to competition in some segments, while others may be prone to increased market power. Digitalization can redefine the ultimate products of the electricity sector, launching new ones, but since some segments may have zero marginal costs, this would require a new approach to pricing and packaging.

Digitalization and decarbonization technologies can interact and co-evolve to create new systems that can further transform the energy sector. The insight uses the framework of co-evolution to analyze the potential outcomes of this interaction, and suggest two corollaries. The first corollary discusses how this can lead to the emergence of a transversal or parallel value chain structure. The second focuses on hyper-specialization and non-zero marginal cost pricing, and suggests that the zero marginal cost of renewable energy would require a new mechanism to capture scarcity sources.

This framework can help analyze relevant policy questions such as the consultation on electricity market design in the UK and EU. The framework aligns well with the proposal of a two-market approach that would encourage demand-side flexibility and incentivize firms to create hyper-specialized products.

This insight argues that digitalization has the potential to revolutionize the electricity sector by disrupting its existing industry structure, enabling new products, and ultimately improving overall industry performance. A pertinent question that needs to be addressed in future research is the reverse question: whether there are certain industry structures and legacies in terms of regulation and infrastructure that facilitate or hinder digitalization. As the electricity sector continues to evolve and integrate digital technologies, it is critical to consider how industry structures can either support or impede innovation.
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entails reallocating government budgets towards the procurement of solar panels for individuals or
households. The paper examines the potential of this strategy to alleviate the current electricity sector's
constraints, expand fiscal capabilities, and support Mexico's transition to a greener economy amid the
realignments in the global supply chain. We argue that subsidizing quantities, rather than prices, could
reduce market distortions and potentially solve long-standing investment issues in the country’s
transmission, distribution, and generation infrastructure. This approach would not only mitigate the
immediate demand-supply imbalance but also lay the groundwork for a sustainable and resilient energy
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Latest Publications by Rolando Fuentes